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DATE

Thursday, December 11, 2025 at 8:30 a.m. ET

CALL PARTICIPANTS

  • Chief Executive Officer — Shawn Nelson
  • President — Mary Fox
  • Chief Financial Officer — Keith Siegner

TAKEAWAYS

  • Net Sales -- $150.2 million, increasing $0.3 million or 0.2% as compared to the prior year period, and slightly below company guidance.
  • Showroom Net Sales -- $102.7 million, rising $11.7 million or 12.8%, driven by the net addition of 17 new showrooms.
  • Internet Net Sales -- $37.3 million, declining $7.6 million or 16.9% compared to last year.
  • Other Net Sales -- $10.2 million, falling $3.8 million or 27.3%, primarily due to cessation of barter transactions and closure of Best Buy shop-in-shops.
  • Sactional Net Sales -- Decreased 1% year-over-year, reflecting category pressures.
  • SACs Net Sales -- Decreased 9% year-over-year, showing weakness in this product segment.
  • Other Product Sales (including Snug platform) -- Increased 126.3% over prior year, driven by new product launches and platform extensions.
  • Omnichannel Comparable Net Sales -- Decreased 1.2% during the quarter, offset by new and non-comp sales channels.
  • Gross Margin -- 56.1% of net sales, down 240 basis points primarily from tariff and transportation cost increases, with some offset from price increases and cost savings.
  • SG&A Expense -- 49.9% of net sales, increased from 47.9%, due to higher payroll, licenses, rent, and overhead.
  • Advertising and Marketing Expense -- $3.1 million or 57% increase to $21.1 million, reaching 14% of net sales versus 13.3% last year.
  • Operating Loss -- $15.8 million compared to $7.7 million in the year-ago quarter.
  • Net Loss -- $10.6 million, or $0.72 per share, versus $4.9 million or $0.32 per share a year prior.
  • Adjusted EBITDA Loss -- $6 million compared to positive $2.7 million previously.
  • Cash and Liquidity -- $23.7 million in cash/cash equivalents, $36 million in undrawn credit facility, and no debt.
  • Inventory Position -- Management indicated inventory quality and quantity remain strong, with plans to end the fiscal year with meaningfully lower inventory dollars than prior year.
  • Share Repurchases -- No buybacks in the quarter; $6 million repurchased year-to-date; $14.1 million remaining under authorization.
  • Fiscal Year Guidance -- Net sales expected between $685 million and $705 million; adjusted EBITDA $37 million to $43 million; gross margin 56%-57%.
  • Q4 Guidance -- Net sales of $230 million to $256 million, adjusted EBITDA $51 million to $56 million, and gross margin 57.5%-58.5%.
  • Physical Store Expansion -- Slated for approximately 10 net openings in fiscal 2027, down from prior pace to focus on core execution.
  • Domestic Manufacturing Initiative -- Sactional core insert production to begin domestically by summer, targeting gross margin neutrality or improvement and supply chain efficiency.
  • Major New Product Launches -- Planned for calendar 2026, including Snug sofa platform extensions and a distinct high-end sofa line targeting upper-tier consumers.
  • Customer Experience Enhancements -- Recent introduction of scheduled room-of-choice delivery and imminent beta for white glove services driven by customer demand.
  • Marketing Shift -- Increased promotional activity and heavier focus on paid digital, influencers, and AI-powered content after price increases pressured lower-dollar volume transactions.
  • Black Friday/Cyber Monday Performance -- Achieved “record Cyber Monday,” indicating strong holiday period growth at the start of Q4.
  • Leadership Additions -- Appointment of Jacob Pat as CTO and Wan Ling Martello to the board of directors to drive digital and operational transformation.
  • “Loved by Lovesac” Resale Program -- Now active in 27 states, offering 20%-25% discounts and expanding revenue streams, with a formal trade-in pilot set for Q1 next year.

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RISKS

  • Gross margin fell 240 basis points due to inbound transportation and tariff costs.
  • Net loss widened to $10.6 million from $4.9 million, as operating loss and SG&A deleverage pressured profitability.
  • CFO Siegner stated, "incremental need for a step up in promotions to remain competitive. Particularly as we target that below $6,000 transaction," will pressure Q4 gross margin.
  • CEO Nelson said, "at the high end, which is really where we compete, it's worse than the industry on balance. And so," signaling macro risk for core customers.

SUMMARY

Management reported marginal sales growth as net sales reached $150.2 million, while profitability fell short due to gross margin contraction and higher SG&A. Executives highlighted new U.S.-based manufacturing for Sactionals inserts launching by summer, designed to mitigate tariff exposure and support margin stability. Fiscal 2026 guidance outlined $685 million to $705 million in sales and 56%-57% gross margin, with Q4 projections reflecting incremental promotional pressure and a cautious approach to consumer demand. Leadership outlined major new products, enhanced resale and delivery services, and a marketing overhaul focused on digital and performance channels. Lovesac (LOVE 15.39%) slowed showroom expansion to preserve capital and focus on profitability as it prepares for significant product innovations in 2026 and a major “new room” launch in early 2027.

  • CEO Nelson said, "Made in The USA Sactionals, Better and hopefully cheaper is the goal. Just a few months away," describing expedited progress in reshoring production for core products.
  • Management confirmed omnichannel comp sales are positive so far in Q4, with early holiday season growth outperforming the prior year.
  • Shawn Nelson reported, "our most prolific year ever for new product introductions" is expected in calendar 2026, with continued investment in the digital sales platform.
  • Advertising and marketing expenses increased to 14% of net sales, as the brand rapidly shifted spend into influencer and paid digital at the expense of linear TV.
  • The “Loved by Lovesac” resale and trade-in model is expected to launch an internal associate pilot in Q1 2026, with a rollout to customers hoped for starting in Q2 2026, potentially expanding lifetime value and revenue.

INDUSTRY GLOSSARY

  • Sactionals: Lovesac's modular, reconfigurable sofa system, comprising interlocking "seats" and "sides."
  • Snug: A product platform at Lovesac positioned as a lower entry-point sofa, distinct from Sactionals, launched in 2025.
  • Omnichannel Comparable Net Sales: Sales from existing channels (physical and digital) open at least 12 months, used to evaluate organic growth trends across platforms.
  • StealthTech: Integrated audio and charging technology embedded in select Lovesac seating products, available at Costco and other channels.
  • Loved by Lovesac: Company-operated program for resale of pre-owned Lovesac furniture, offering discounted pricing and new revenue streams.

Full Conference Call Transcript

Shawn Nelson, Chief Executive Officer, Mary Fox, President, and Keith Siegner, Chief Financial Officer.

Shawn Nelson: Before we get started, I would like to remind you that some of the information discussed will include forward-looking statements regarding future events and our future financial performance. These include statements about our future expectations, financial projections, and our plans and prospects. Actual results may differ materially from those set forth in such statements. For a discussion of these risks and uncertainties, you should review the company's filings with the SEC, which includes today's press release. You should not rely on our forward-looking statements as predictions of future events.

All forward-looking statements that we make on this call are based on assumptions and beliefs as of today, and we undertake no obligation to update them except as required by applicable law. Our discussion today will include non-GAAP financial measures, including EBITDA and adjusted EBITDA. These non-GAAP measures should be considered in addition to and not as a substitute for or in isolation from our GAAP results. A reconciliation of the most directly comparable GAAP financial measure to such non-GAAP financial measure has been provided as supplemental financial information in our press release. Now I would like to turn the call over to Shawn Nelson, Chief Executive Officer of The Lovesac Company. Shawn?

Shawn Nelson: Good morning, everyone, and thank you for joining us. I'll start by sharing a high-level overview of our third-quarter results, provide an update on our Design for Life product platforms, and touch on our views for the remainder of the year before passing the discussion over to Mary Fox, our President. Mary will discuss our tailored customer acquisition engines and key growth enablers. Finally, Keith Siegner, our CFO, will review our financial results and provide more detail on our Q4 and fiscal 2026 outlook. Beginning with our third quarter, macro conditions proved a little more challenging than we anticipated, with consumer uncertainty leading to meaningful choppiness week to week, particularly in our lower dollar volume transactions.

As a result, third-quarter net sales were $150.2 million, about $1 million below our guidance range. While we are not happy with this outcome, it's important to note that our focus on secular growth initiatives such as new products and the beginnings of a major evolution in our marketing tactics enabled a slight year-over-year growth in net sales. Reflecting market share gains as compared to our category, which we estimate declined approximately 2% for the comparable quarter and 4% year to date. Adjusted EBITDA and net loss for the third quarter were within our guidance ranges.

Pressured by a 240 basis point decrease in gross margin resulting from increases in tariffs and transportation costs as well as increased promotional intensity, offset by price increases, cost savings, and vendor concessions. Total omnichannel comparable net sales decreased 1.2% for the quarter offset by contributions from new and non-comp touch points. Our balance sheet remains strong with inventory and net cash at healthy levels. And as Keith will outline later, we remain on track to end the fiscal year with a more optimized inventory carry versus the prior fiscal year and a very solid net cash balance with no borrowings. We've remained active on bringing Design for Life product innovation. You all know about our new Snug platform already.

It has become an important part of our sales mix and in-store presentation. During the quarter, we also successfully launched our national advertising campaign for Snug, which Mary will talk more about in a bit. But there was even more news for the fourth quarter and the holiday season. We launched an exciting extension to our wildly successful accent chair line with the Pillow Sac Chair Junior. It delivers the same cloud-like comfort, premium materials, and design versatility now thoughtfully scaled for smaller settings from living rooms and apartments to bedrooms and reading nooks. We also introduced a fourth arm option for sectionals.

The swept arm, taking a nod from the snug where swept arm has been the runaway favorite style, Sactionals customers asked, and we responded. The instantly popular swept arm brings a more modern aesthetic to the platform. A refresh of our Sactionals quick ship cover assortment and on-trend limited edition fabrics for sacks and foot sacks round out a busy few months of new product launches at Lovesac. Let's spend a minute on our brand evolution and strategic shifts. First, last quarter, we discussed the initial learnings from our brand evolution refresh. And the implications for our strategic road map.

We knew we needed to sharpen and focus our positioning to not only allow us to confidently extend this brand further, but also deeper into the categories where we already have strength. We are rebuilding our marketing playbook on the foundations laid by our new team, which should enable us to compete more vigorously for share in existing and new rooms. Second, now four years into the category declines with uncertainty around the consumer remaining, it's more clear than ever that prudence mandates we should be pragmatic about modeling upside potential in this macro backdrop. Or even from secular initiatives, in this context in the near term.

We will not base our plans on expecting any recovery from the consumer or the category in the near to medium term. Combining these two considerations, we believe the optimal approach over the next few quarters the strategic sweet spot, is to harvest the brand that we've built to date shoring up our place in the living room and aiming to take even more share in these realms while reinforcing our brand equity. We see massive opportunity to ignite the core Lovesac business through Design for Life product extensions and by leaning into the green shoots where seeing in our customer acquisition engines, coming off the brand evolution work already. So what does this mean?

I'm excited to share more details because we expect calendar '26 our fiscal 2027, will be our most prolific year ever for new product introductions and other announcements. And in the bull's eye of our core positioning. The initiatives we're planning are meaningful to our customers, quick to market, and demand relatively few costs ahead of their launch. Here are just a few. We plan to unlock the Snug sofa, our newest platform, through platform extensions that directly address early consumer requests. In short, the Snug can do more literally and figuratively and it will this coming year. We'll also optimize our channel experience leaning into outsized early success of the snug in our digital and Costco channels.

We plan to unlock Sactionals as the workhorse for Lovesac through a full redesign of core inserts that will enable domestic manufacturing add features, benefits our customers will love. And give us the opportunity to refresh our portfolio of patent and IP protections around Sactionals. Even better Sactionals manufactured using new materials that work seamlessly with all our previous versions. This is a really big deal, and it represents significant work by our talented in-house and some external partners. This has been underway for a while now, but was accelerated given all the tariff noise this year.

To be clear, we are well along this path already working with existing and some new vendors and believe we can begin domestic manufacturing for our core SKUs this summer at a gross margin neutral basis. And potentially even margin favorable basis. This is possible because of a unique Lovesac competitive advantage. High volumes of limited SKUs, This unlocks automation, and it serves as the basis for our new product development approach in all rounds. Made in The USA Sactionals, Better and hopefully cheaper is the goal. Just a few months away.

With an expanded snug platform designed to lower the entry point into our brand, we are excited to announce a new high-end sectional sofa platform that we expect to launch midyear coming up. This is distinct from Snug or Sactionals. It will have a different aesthetic and even larger footprint. And different use case than Sactionals or Snubs to target the higher-end consumer where we are seeing the healthiest demand right now. We also believe it can help anchor from above the value proposition for Sactionals, leading to increased consumer appreciation for our Workhorse product that's priced right down the middle now.

Next, we plan to reduce friction for our customers by removing the single biggest reason for not purchasing Lovesac according to their feedback. Lack of tiered delivery and setup options. We just launched scheduled room of choice delivery in November which has been very well received. Next, we plan to beta test for white glove delivery and assembly by Q1. With a formal launch as soon as possible thereafter. Driven by measurable customer demand and providing new revenue opportunities for Lovesac. We have even more introductions to drive secular growth plans for this coming year that we aren't quite ready to share yet. Leveraging both of our superpowers, designed for life products and our tailored customer acquisition engines.

You'll hear more from us in the coming quarters. As part of this strategic direction, we've decided to shift the launch of our next new room a few months into early calendar 2027. This gives us the opportunity to prioritize a set of exciting near-term initiatives that we believe will drive more efficient growth and profitability through this challenging macro environment. It also gives us the time needed to prepare for a major category-defining launch of this new room one we intend to bring to market with a significant splash.

Please note that as part of this clear focus on winning the living room, and igniting the core, we are temporarily slowing the expansion of physical stores in the coming year. This will allow us to set the optimal omnichannel strategy for a multiroom brand with the Lovesac store of the future as an essential element of our customer acquisition engine superpower over the years to come. Regarding our outlook, Beginning with the macro, the slight improvement in category trends has continued. With low to mid-single-digit declines of late as compared to mid-single-digit declines months ago. That said, the weakness has become more pronounced for us in the lower dollar volume transactions.

Say, below $6,000, which led to the slight shortfall in the third quarter, We've already adjusted our marketing and promotional strategies as a result. The all-important Black Friday and Cyber Monday holiday weeks have been very encouraging. Achieving strong growth already versus last year. However, as mentioned before, the trends have more peaks and troughs in them than in prior years. And we also have tougher comparisons coming over the New Year's and January holidays where we escalated our conversion efforts last year. We are heartened by recent performance for sure. But still choose to maintain an abundance of caution.

Keith will provide our updated guidance ranges in a few minutes, but in short, we estimate this year fiscal 2026, to be a year of modest market share gains for Lovesac, with absolute growth despite a down category. And with encouraging green shoots showing now from all of our strategic adjustments being implemented in Q4 and on into the New Year. Shifting gears to leadership and governance, we are thrilled to welcome a new member to our top leadership team this quarter, Jacob Pat has joined us as Lovesac's new Chief Technology Officer. Jacob brings valuable experience that will support the acceleration of our digital transformation initiatives.

In addition, Lovesac continues to broaden and deepen the relevant skills and experience at our board of director level. Following the addition of a seasoned global technology leader in Allen Bone this August, H and M, Coca Cola, and others on his CV. We are excited to have Juan Ling Martello join our board of directors quite recently. Wan Ling's exceptional track record of driving transformational growth where she serves on the board of Alibaba, and previously on the board of Uber, along with her own deep experience as a top c suite executive at some of the world's largest and most respected consumer and retail companies.

She is an invaluable addition to our board, and we are proud to have her as an adviser. Her proven expertise in data-driven resource allocation and digital transformation that drives consumer engagement aligns perfectly with our mission as a technology-driven furniture company. Lovesac is more than the sum of its parts. Lovesac is a brand, a brand that we believe will be the most loved home brand in America in pretty short order. And one day, the most loved brand in America full stop. That's our ambition. We are inventing and investing steadily even through these tough times. For this category while balancing cash flow generation and profitability.

Our tall ambitions begin with reaching our goal of 3,000,000 Lovesac households by 2030, households that will have ever more designed for life products across ever more rooms in the house We are totally focused and committed to this midterm goal that will produce meaningful growth over these next few years regardless of what happens in the macro. While our ambitions are grand, we are patient. We recognize the need to evolve our strategies adapting to the economic landscape and competitive realities of this time. Harvesting the brand we have built to win the living room and the categories we already have so much brand equity in is the right strategy for right now.

Profitable growth and market share gains driven by focused execution sets the perfect stage to bet big on the launch of that new room in early calendar 2027 when the consumer and category are hopefully in a stronger fundamental position to boot. With that, I'll hand it over to Mary.

Mary Fox: Thank you, Shawn, and good morning, everyone. Building on Shawn's overview of our Design for Life platforms, I'll now focus on our second superpower, our customer acquisition engine, as well as our growth enablers that are fueling our momentum. As a reminder, what makes our customer acquisition engine so powerful a superpower and effect, is our ability to leverage different mixes of brand and performance marketing, digital configuration through lovesac.com, incredible showroom experiences, and efficient partnerships to optimal effect by product platform. Done wisely, we can efficiently generate customer awareness convert that awareness into customers, and ultimately build long-term relationships and brand love. So let's start with brand and performance marketing.

Quarter three was only the beginning of an evolution in our marketing and media strategy. The first step was to modernize our go-to-market approach and media mix to drive more personalized messaging that better meets consumers where they are meaningfully consuming content. We were pleased with the initial impact, and some highlights worth mentioning include culturally relevant campaigns with celebrities like Britney Snow and Bethany Frankel. Seasonal campaigns like Sack to School, exciting campaigns like our NFL season kickoff featuring New York Giants superstars Jackson Dart and Cam Scatterbook. The tale was long with activations with CBS, NCIS, and nostalgic collab with the Twilight movie saga and more.

That said, as Shawn mentioned, in quarter three, we saw more pressure in our smaller and mid-range setups. Following recent price increases taken to offset the tariff impact. These configuration types tend to track more closely with the middle-income consumer. And what we saw was consistent with broader category behaviors of less trading up and some trading down. This is good timing in that we were able to implement the second step of our marketing evolution in time to address this dynamic for the all-important fourth quarter. We needed to change approach, focusing more on attracting and converting the customers close to purchasing. This included further shifts out of traditional media formats.

Such as linear TV and towards heavier paid influencer programmatic digital channels, and other engaging digital content to highlight the unique aspects of Lovesac and our value proposition. We are also expanding into AI search and content creation, which can be a material upside for us. Of course, we reinforce this with compelling discount offers, particularly around smaller dollar transactions opening price point options. The good news is that the combined Black Friday, Cyber Monday holiday period achieved strong growth to last year. Now there's still quite a bit of the quarter to go, including New Year in January, but an encouraging start. Second is our digital configurations and how we bring Lovesac to life online.

This is an important topic one with significant momentum as we entered the fourth quarter. The website is our single biggest and most accessible store. And we have been aggressively updating and adapting our approach following the reorganization of the marketing and ecommerce teams in September and the rebuilding of our marketing playbook. In short, we built a more cohesive and responsive digital ecosystem, We set up more powerful destinations across the site including the homepage, seasonal guides, bundles that resonate, and more. These destinations create more relevant entry points as customers began actively exploring options for their homes, and provide clearer pathways for discovery of upgrade options and more products.

This is supported by a strengthened media and advertising strategy. We expanded our digital presence and broadened our tactic mix with new MBA placements through fan connect and Reddit product ads. We introduced Roku, Showcase, and Pause format, reinforced YouTube content and keyword alignment, expanded programmatic reach, activated AI-powered search optimization, and delivered refreshed holiday CRM creative. As an example of effect and within the small and midrange configurations, we saw encouraging signs as the quarter progressed. What began as mid-quarter softness narrowed in the final weeks of quarter three. And turned to growth as we entered the fourth quarter. Momentum strengthened further through Cyber five where we saw the strongest Cyber Monday in our history.

Well ahead of both last year and the year before that. And this is a testament to the impact. Lastly, Snug remained a standout performer online, delivering meaningful sequential growth and reinforcing the strong customer response to the platform online. Third is our showroom experience, the physical brand amplifiers of our design life products. In quarter three, we launched our new customer demonstration architecture, the BrandTor, a standardized repeatable walk-through designed to guide customers through the value, versatility, and performance of our various products, including Snug, which has been fully deployed in time for the holiday selling season.

Early indicators show that the brand tour is helping associates create more impactful demonstrations and deepen customer understanding while amplifying our Design for Life story across all stores. As a result, customer satisfaction in-store has steadily improved this year and remains significantly higher among customers who experienced a demo. Indicating that the tour is contributing positively to the overall experience. And then finally, complementing our showrooms as our partnership model. We enhanced our Costco partnership extensively in quarter three. Our bundled offers now include the Snug sofa and accent chair, Sactionals reclining seat, and five new fabric offerings.

We deployed upgraded roadshow fixtures enabling live demonstrations of stealth tech capabilities, which is an important differentiator that sets us apart from other seating at Costco. We improved the digital shopping experience at costco.com, leading to accelerating trends there. And last week, expanded Lovesac's reach into Hawaii and Alaska, which positions us for additional market share gains. When combined, these four elements of our customer acquisition engines create an unmatched customer experience that drives brand love, and enables long-term relationships and we are reinforcing this further with our customer-facing services. Since quarter two, our resell program, Loved by Lovesac, has now expanded to a total of 27 states. This expansion enhances customer lifetime value and creates new revenue opportunities.

All while continuing to support our mission of delivering products that are built to last and adaptable to our customers' lives. In parallel, we've also made significant progress towards bringing a formal trade-in program to market. We're on track to introduce an internal pilot for associates during quarter one next year and hope to roll out the trade-in program to customers starting in quarter two. Perhaps even more importantly, we are very happy to share that we have launched the first wave of enhanced delivery and assembly services in November. Customers can now schedule the delivery with placement into their room of choice for a reasonable fee.

Furthermore, we are now also testing the second wave which will be white glove services inclusive of assembly in their home. We're hopeful that these services make it easier for anyone and all customers to buy Lovesac products and love them for years to come. Key to sustaining our long-term profitable growth are our growth enablers, with our supply chain playing a pivotal role. As I shared before, our supply chain is a competitive advantage. A true strength. Today, I'd like to focus on our path to manufacture the bulk of our products in The United States in the medium term. First, we're on track to begin domestic production of fractional insert pieces next summer.

Based on progress to date, we believe that we can do this with gross margins that are neutral potentially favorable to current levels. How are you delivering this, do you ask? Over the past year, we have completely redesigned the Sactional chassis. Using a mix of new materials to make it even more durable and highly automatable. There simply aren't direct competitors with limited SKU assortments and strategies that enable this approach. Which is what creates this opportunity for Lovesac. The redesign enabled a series of enhancements that improve comfort functionality, and ease of assembly. All of which are of real value to our customers.

These redesigns also afford us the opportunity to generate new defensible patents and IP to help ward off competition. And, of course, the new factionals will be reverse with existing products and future compatible with inventions we're currently cooking. We have three excellent manufacturing partners that hope to cover different geographies of The United States order to provide efficiency and distribution. The better we get at making products, closer to our customers and therefore shipping them over shorter distances, should reduce required weeks of stock on hand and transportation costs. We are very grateful to our team that have worked so hard on this initiative Domestic automated efficient manufacturing has long been a goal at Lovesac.

And seeing it close to reality is so exciting. Doing it in an economically advantageous way is even better. And with that, I will hand over to Keith to share more on our financial performance and outlook. Keith?

Keith Siegner: Thanks, Mary. Let's jump right into a quick review of third quarter followed by our outlook for the rest of fiscal 2026. As we begin with performance metrics, please note that all references the third quarter refer to fiscal 2026 unless otherwise noted. Net sales increased $300,000 or 0.2% to $150.2 million in the third quarter compared to the prior year period. Showroom net sales increased $11.7 million or 12.8% to $102.7 million in the third quarter compared to the prior year period. Driven by the net addition of 17 new showrooms partially offset by a decrease of 1.2% in omnichannel comparable net sales.

Internet net sales decreased $7.6 million or 16.9% to $37.3 million in the third quarter compared to the prior year period. Other net sales, which include pop-up shop sales, shop-in-shop sales, open box inventory transactions, the Love by Lovesac program, decreased $3.8 million or 27.3% to $10.2 million in the third quarter compared to the prior year period. The decrease was primarily attributable to the company's decision not to engage in any barter transactions during the current period and the closure of the company's Best Buy shop-in-shop locations as a result of the discontinuation of our partnership with Best Buy.

By product category in the third quarter our Sactional net sales decreased 1% SACS net sales decreased by 9% and our other net sales which includes our new snug platform, decorative pillows, blankets, accessories, increased 126.3% over the prior year. Gross margin decreased two forty basis points to 56.1% of net sales in the 2026 versus 58.5% in the prior year period. Primarily driven by increases of 320 basis points in inbound transportation and tariff costs, 20 basis points in outbound transportation and warehousing costs, partially offset by an increase of 100 basis points in product margin driven by price increases, cost reduction initiatives, and concessions from our vendors in response to changes in the tariff environment.

SG and A expense as a percent of net sales was 49.9% in the 2026, versus 47.9% in the prior year period. The increased percentage is primarily related to higher payroll costs license and registration fees, rent, and other overhead costs. The increase in selling, general, and administrative expense dollars was primarily related to increases of $4.1 million in payroll, including an out of period $1.6 million expense pertaining to employee benefits in prior periods. $1 million in licenses and registration, $700,000 in rent, and $800,000 in other overhead costs. The increases were partially offset by decreases of $3 million in legal and professional fees, and $400,000 in equity-based compensation.

Rent increased by $700,000 related to a $800,000 increase in rent expense from our net addition of 17 showrooms. Partially offset by a $100,000 reduction in percentage rent. We estimate non-recurring incremental fees associated with the restatement of prior period financials were approximately $1.2 million in the third quarter. Advertising and marketing expenses increased $1.1 million or 57% to $21.1 million for the third quarter compared to the prior year period. Advertising and marketing expenses were 14% of net sales in the third quarter, as compared to 13.3% of net sales in the prior year period.

Operating loss for the quarter was $15.8 million compared to $7.7 million in the third quarter of last year, driven by the factors we just discussed. Before we turn our attention to net loss, net loss per common share and adjusted EBITDA, please refer to the terminology and reconciliation between each of our adjusted metrics and their most directly comparable GAAP measurement in our earnings release issued earlier this morning. Net loss for the quarter was $10.6 million or negative $0.72 per common share compared to a net loss of $4.9 million or 32¢ per common share in the prior year period.

During the third quarter, we recorded an income tax benefit of $5 million as compared to $2.1 million in the prior year period. Adjusted EBITDA loss for the quarter was $6 million as compared to adjusted EBITDA of $2.7 million in the prior year period. Turning to our balance sheet, we ended the third quarter with a healthy balance sheet that provides substantial flexibility for Lovesac to invest in growth to enhance long-term value creation for shareholders. We reported $23.7 million in cash and cash equivalents while retaining $36 million in committed availability and no borrowing on our recently amended credit facility.

First, we feel very good about both the quality and quantity of our inventory and our ability to maintain industry-leading in-stock positions and delivery times and believe we can end fiscal twenty-six with meaningfully lower dollars inventory than that at the end of fiscal twenty-five. Second, nothing has changed in our strategy to allocate excess capital opportunistically with a focus on long-term value creation and enhancing returns on capital. Given significant uncertainty and macro backdrop, owing to tariffs and consumer spending over the near term, we did not repurchase any shares of our common stock during the third quarter.

Year to date, we've repurchased $6 million of our common stock outstanding and we have approximately $14.1 million remaining under our existing share repurchase authorization. Please refer to our earnings press release for other details on our third-quarter financial performance. So now our outlook. As Shawn mentioned, we experienced very modest improvement in category trends in the fiscal third quarter. And our current outlook for the fourth quarter looks more like a negative low to mid-single-digit category decline.

While we're very encouraged by the demand growth we achieved through the important holiday period, we're cognizant of our more difficult compares over New Year's in January and also the lack of any sustained trend in consumer spending week to week recent months. What remains clear is the consumer is price sensitive and deal focused. And we've raised our discount plans to increase competitiveness particularly for the below $6,000 transaction. Combined with our caution on sales for the remainder of the quarter, this places some incremental pressure on gross margin versus what we originally anticipated for the fourth quarter. Specifically for the full year, we estimate net sales of $685 million to $705 million.

We expect adjusted EBITDA between $37 million and $43 million. This includes gross margins of 56% to 57% advertising and marketing of approximately 12.5%, as a percent of net sales and SG and A of approximately 40% to 41% as a percent of net sales. We estimate net income to be between $2 million and $8 million. We estimate diluted income per common share in the range of $0.15 to $0.49 and approximately 16.2 million estimated diluted weighted average shares outstanding. For the fourth quarter, we estimate net sales of $230 million to $256 million representing low single-digit revenue growth at the midpoint and fully representative of all our near-term plans for tariff mitigation.

We expect adjusted EBITDA between $51 million and $56 million. This includes gross margins of 57.5% to 58.5%. Advertising and marketing of 10% as a percent of net sales and SG and A of 27.5% to 28.5% as a percent of net sales. We estimate net income to be $30 to $36 million. We estimate diluted income per common share to be $1.88 to $2.22 with 16.2 million diluted weighted average shares outstanding. We aren't providing full-year fiscal twenty-seven guidance today.

However, to expand on a comment Shawn made earlier, it's part of our strategy to win the living room by igniting the core over the next several quarters, we plan to slow net showroom expansion to approximately 10 net openings in fiscal twenty-seven. In summary, we're balancing prudence and efficiency with our belief that it's essential to stay focused on the big picture. That's the massive long-term opportunity for tremendous value creation for all Lovesac stakeholders. We're building the Lovesac brand and investing in new product innovation that spans style, function, new categories that supports a powerful multiyear secular growth outlook with macro upside exposure, as I think I'm the case. With that, over to you, operator.

Operator: Thank you. We will now be conducting a question and answer session. You may press 2 if you would like to remove your question from the queue. And for participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. We ask that you please limit yourself to one question and one follow-up question. One moment while we poll for questions. Our first question is from Thomas Forte with Maxim Group. Please proceed.

Thomas Forte: Great. Thanks. So one question, one follow-up for me. And best of luck in navigating a challenging environment. On the Love by Lovesac ecommerce efforts, can you talk about what is the discount to the consumer? So how much are they able to save versus buying the product brand new? And then what's the gross margin to Lovesac on the ecommerce sale?

Mary Fox: Tom, good morning. Thank you for the question. So yes, so the Love by Lovesac, the way we price positioning, it's around about a 20 to 25% discount level to what you'd typically be able to see achieve if you were buying at full price, or at a discount level. We have two grades for Loved by Lovesac, so it is basically practically new. And then good in terms of the condition. So there are two different tiers in terms of the pricing.

And I think, you know, for us, as we've kind of rolling it out, we're now in 27 states and we're really starting to see the interest build of obviously know that our product lasts for a lifetime. I think the second piece that we're excited about is obviously rolling out this part in terms of being able to do resale was really just building the processes so that we can unlock trade-ins. Next year We believe that will be incredibly powerful as people want to change covers. Buy into some of the new innovations such as recliner and so forth. So look forward sharing more, of that from next year.

Keith Siegner: Just to add one thing. This year has largely been about building the infrastructure and capabilities to get the program to a broad base of folks and to test all of the elements of it for proper functionality. Now that we're in 27 states with a few more still to come, but, you know, the lessons, we'll be able to really lean into this effort and expand it. We've got some other things we're considering to drive this piece of our business even further and put ourselves into great position. To move meaningful volumes through this, especially, right ahead of us launching the trade-in program to the

Operator: Our next question is from Michael Baker with D. A. Davidson. Please proceed.

Michael Baker: Thanks. And I think Tom didn't get to ask his follow-up. But anyway, I will let me ask for I know you're not giving guidance for next year, but a lot of changes for fiscal twenty-seven versus what we were previously thinking. You're pushing out the lawn to the new room. You're cutting back on showrooms. But you're launching a new sofa. It sounds like you're gonna be a little bit more promotional. Can you just help us with some of the p and l impacts we should expect next year in terms of how that all impacts sales, comps, margins, etcetera? More domestic manufacturing. Again, a lot of changes for next year. Give us some help. Please.

Keith Siegner: So I'll I'll I'll kick this off, and then I'll pass it over to Shawn to talk a little more qualitative. Look. Mike, very fair questions. We're we're really in the midst of landing the fourth quarter and ending up this fiscal year and in the process of our formal AOP planning for fiscal twenty-seven at this point. Give us a couple months, and we'll give you a lot more details. Like Shawn and Mary both mentioned earlier, we're very pleased with the initial progress that what we've seen from these adjustments that we've seen in the fourth quarter.

But we need a little bit more time know, Shawn will get into some of the qualitative stuff, but the key principle, I think, to this is we believe that during a protracted period of uncertainty in the macro by the on harvesting the brand, we can make more money off of the existing infrastructure and products that we have and launching new products that are quick to market and less costly to launch given their proximity to our existing estate. That seems to be the more prudent way for us. And, like Shawn said, it gives us even more time to transition into a big splash for the new room launching in early.

You know, calendar twenty-seven, in a material way, so that drives awareness and appreciation right off the bat for that. But, Shawn, what else do you have to add?

Shawn Nelson: Yes. Thank you. Given some of the success we've been seeing with Snug and the refresh. As our marketing team is really getting their feet beneath them. With a lot of the change that's been we've been living over the past few months and really seeing green shoots from we see a path to, just build a more robust financial situation and cash position leading up to the launch of that new room, which is to get which is the kind of position we wanna be in when we're really going to, you know, swing about hard and, launch with great gusto.

So it's it's really just a shift of a few months in practicality, and this new sectional sofa platform that we are so excited to reveal Maybe the next time we speak is something that will fill a hole a different hole in our offering than SNUG has already begun to fill with its introduction, and there's more to come on the SNUG platform as well.

So just as Keith said, a way to build more profitability and strength in our biz in our core business as we prepare for that new launch and you know, we're we're actually really grateful to see the results from Snug and also the marketing engine that's been performing quite well over the last little bit. With some new tactics that gives us a lot of confidence that this is the right strategy for the business in the near to medium term.

Michael Baker: Fair enough. If I could ask a follow-up I understand the desire to be prudent for the fourth quarter outlook, but the industry seems like it's better than it was. You're seeing a lot of momentum. Strong Black Friday, etcetera. I get that there's more difficult comparisons. But you knew that. So, why the lower fourth quarter outlook today than what was implied in your guidance that you gave three months ago. Again, if the industry seems to be getting better, you have some momentum, is it that the industry improvement isn't as it's better but not quite what you thought it would be? Just trying to square that circle.

Shawn Nelson: Yeah. So the industry has lots of different nodes, and certainly some would say it's getting a little bit better. But at the high end, which is really where we compete, it's worse than the industry on balance. And so you know, it's it's choppy. It's messy. But and look. We did have a very strong Black Friday. Through Cyber Monday record Cyber Monday for us. It's an abundance of caution. We have tough compares. Coming over the New Year. You know, back to the industry, you know, for November, it was down 3%. But the high end was down 11% just to make that real for you. Right? So that's the backdrop we're operating in.

And out of an abundance of caution, knowing that there's some tough compares, particularly through New Year, just wanna be prudent. We certainly you know, we recognize, like, very slight miss on the quarter. And that's beyond frustrating. You know, for a team that prides themselves on performing and meeting expectations. So that's what it's about for us right now.

Michael Baker: Fair enough. Thank you.

Operator: Our next question is from Eric DeLonier with Craig Hallum Capital Group. Please proceed.

Eric DeLonier: Great. Thanks for taking my questions. First, I was wondering if you could just provide a bit more color on where the revenue weakness in the quarter is coming from. You mentioned weakness in items under $6,000 Just wondering if you add a bit more color to that. Is that mostly sacks or smaller components of the Sactionals? And should this have sort of naturally a greater impact on Internet sales versus showroom? Can you just provide a bit more color on sort of where the revenue weakness is coming from? That'd be helpful. Thanks.

Mary Fox: Yes. Hey, good morning, Eric. Thank you for the question. Yes. So we've seen definitely, I think, Shawn referenced earlier the adjustments we made coming out of Q3 into Q4. So seeing a big step up of improvement in the lower end transaction sizes which is primarily the small setup factional. So big step up from obviously the decline and the challenge that we faced in quarter three. I think the second piece is we are continuing to see at the high end, just as premiumization, that really is driving, you know, a higher AOV. So they're buying more recliners. More add ons in terms of storage, and even more premium in terms of fabrics as well.

And then I think the last piece, and I think I touched on it earlier, Heidi has been leading a lot of transformation in the marketing team, putting new leaders in place and in two areas. One is around on the website, and they've been doing a huge amount of work really overhauling, the configuration experience to really be able to drive much better excitement around the holiday gift guide, and the web is performing at a much higher growth rate to the total company in quarter four. So you're seeing a lot of that benefit that's that's coming through.

And then I think, you know, Shawn talked about of the new innovations, whether it be Pillow Sac Jr, accent chair and the swept arm and various other things. That four helping to bring some more energy to our growth. So, you know, we're gonna continue to be able to drive our platforms with the innovation and the excitement. You know, we've brought in some great new covers, for example, and the colors that are new are on fire. So, you know, as we continue to drive that excitement and then obviously get the website really to be able to acquire customers at a faster rate because it is our most efficient store.

That's really what we've seen the strength through, you know, December. For this quarter.

Eric DeLonier: Alright. That's helpful. I appreciate that color. And then just a follow on for me. When you look at the marketing overhaul here, could you just kinda give us a sense of you know, how long you sort of expect this to take? How long you expect to sort of wait to see the impacts of this? Presumably, you're already seeing some impacts on digital, but just wondering what other time lines you're thinking about and we should be thinking about as it relates to this marketing shift and the ultimate success there? Thanks.

Mary Fox: Yeah. I think yes. Thank you, Eric. I think it's thinking two parts. I think first is real time and near time. It's happening right now. So as we talked in terms of shifting out of traditional media formats, even more aggressively than ever before, such as linear TV, moving a lot more to heavier paid influencers. We did a lot of that towards the end of quarter three and quarter four, a lot more around pragmatic digital channels. That's all real time. That's happening right now, and we contribute the quarter four performance to, obviously, you know, a lot of those shifts. So that's really been happening real time.

Then in addition, you know, as I touched on the website before, performance, that really was turning in a matter of hours and days as the team kind of pivoted and made some of those adjustments. So that is all kind of in Q4. I think the second horizon as Shawn has talked about the brand evolution, and really how do we bring the brand to life, in terms of the storytelling about the value, the versatility of the brand, and then how do you drop down into the platform. You're gonna continue to see more from Heidi and the team as we get into quarter one and quarter two next year.

As we really bolster up that storytelling and really claim the territory that is uniquely love backed that no one else has. You're just going to continue to see us driving all of those opportunities. And then I think, Shawn, you know, maybe you wanna touch about, you know, our focus on winning in the living room, and particularly Snug's performance in on ecommerce, which has been super strong.

Shawn Nelson: Yeah. No doubt. As we've referenced, we think of ourselves as having these two superpowers designed for life products paired with tailored customer acquisition engines, And you know, on the design for life product side, the snug is becoming a really important part of our portfolio. Think they're they're while it is still ramping, we believe that it will as the platform evolves even over this coming year, help us fill in some of that weakness that we're seeing at the low $6,000 transaction realm. You know? So even though, you know, we're we're we're calling out this weakness at the low end, Simultaneous snug is ramping. But like any new product, it just takes time.

And so, we're really pleased with the results we're seeing. It tells us that, the Lovesac customer wants products from Lovesac. It's not just the specific attributes of Sactionals, and that's led us to, yet another innovation in the SOFA sectional realm that we think again, will help us fill in the assortment and compete more fully against those incumbents who many of them have dozens and dozens of self sectional lines. So we while we have no intention of going that broadly, we are starting to really understand the opportunities we have in that realm.

On the on the marketing side, as Mary said, we're seeing just some really exciting performance in on new tactics that we have not exploited before. We had a marketing playbook on these, you know, speaking of these customer acquisition engines, that got us to where we are. And it's certainly and we're certainly grateful to have experienced all the growth that we've experienced over this last decade. But, needless to say, the world has evolved a ton Our new CMO is, more than capable And you know, so those are the two realms that we're focused on.

Those two superpowers will continue to drive the business but it's a time of great innovation at Lovesac, both on the product side and on the marketing side. And, thankfully, we're seeing those green shoots in the business And I think it was evidenced by our performance over Black Friday and Cyber Monday. So, you know, it's a it's a mixed bag at this very moment given the macro, but we'll continue to look forward to a really exciting year at Lovesac. Next year, we'll be by far, the most prolific year of innovation launches ever. And, we're excited about it.

Eric DeLonier: Appreciate the color. Thank you.

Operator: Our next question is from Matt Koranda with ROTH Capital Partners. Please proceed.

Matt Koranda: Hey, guys. Good morning. Just wanted to make sure I understood the cadence of demand during the quarter and then in the fourth quarter here. So just at what point in the third quarter did demand get worse? It sounded like the middle point of the quarter. There any regions where you saw concentrated weakness? And then drivers of improvement into the fourth quarter, it sounds like promotions and sharper on marketing, but maybe just correct me if I'm wrong there. And then our comps actually positive quarter to date. Just wanna make sure that, I mean, I'm getting the sense that I guess, Black Friday and Cyber Monday were strong.

But is the full quarter to date comp positive, quarter to date here?

Mary Fox: Matt, thank you for the question. Let me start with the second one, and then I'll come to kind of the cadence in Q3. So yes, the comps are positive for this quarter, and we actually had a strong start for quarter that has continued all the way through to today. So I feel very good as, we've all shared in terms of the adjustments that were made in driving the performance, quarter four. To your question, kind of going back to quarter three, we had to we'd shared with you Labor Day was good. And then coming out of Labor Day, we've really started to see that pressure. You know, we'd obviously taken a second price increase.

And that really impacted the smaller sized orders at under $6,000. At the same time, customers are facing uncertainty more broadly, and we really saw that shift down with that impact. I think then, you know, as we saw that drop down, we then made some adjustments. So it's our cadence started to improve. Towards the '3, but obviously not enough to be able to make up that loss in the middle part of the quarter. To your question, did we see any impact regionally? We see a little bit more a challenge in performance in a few states such as Florida and Texas.

But honestly, it really is more broadly lashly as we look across the whole, you know, pet place. Think. So then as we moved into Porta 4, you know, the adjustments we made both in terms of promo cadence, you know, we simplified, we were bolder, but clearer, but instead of having some of the more discreet personalized offers, we just went, you know, full throttle with a winning promotion. And, you know, there were many other companies that were promoting up to 80% off. So we knew we needed to be strong. We wanted to win, and we did win. Based on the November results that just came out yesterday from Bank of America.

And then the second point, your you know, what else shifted was just the optimization of the media strategy, trying to really focus also on that middle income consumer to be able to get them to convert. Again, just pleased to see the step up of that 6,000 and under order performance really moved back up, from where we were in quarter three.

Matt Koranda: Okay. Very clear. Thanks, Mary. And then on the gross margin outlook, I guess, what's driving the softer outlook in the fourth quarter that's implied here? Is that incremental pressure from promotions that you're needing to run to induce conversion? What's the tariff pressure also that's factored into the end of the year here?

Keith Siegner: Yeah, Matt. It's, it's actually quite straightforward versus our prior expectations. It's the incremental need for a step up in promotions to remain competitive. Particularly as we target that below $6,000 transaction as well as you know, you know, some deleverage against fixed costs like warehousing and things like that given a lower absolute level of sales that really is the difference between our prior expectations. Hopefully, that's that's helpful.

Matt Koranda: Yep. Pull it up there, guys. Thanks.

Operator: Our next question is from Brian Nagel with Oppenheimer and Company. Please proceed.

Brian Nagel: Hey, good morning. First question I want to ask, is with regard to the reshoring comments. Know, I know and, Shawn, we've we've talked about this for a while now. Plans for Lovesac to bring more menu back to United States. And we think the conversation suggested, you know, it's it's happening, happening aggressively. So I the question I wanna ask is, Steve, we're thinking about the model for Lovesac. And the common say suggested, you know, it should be kinda neutral ish. Know, to, I guess, gross margins or gross profits. How should what would be the, you know, longer term benefits to the to the LuvSec model of bringing manufacturing back to The U. S?

Shawn Nelson: Yes. Great question. Thank you. To be honest, this is the initiative that perhaps we're we're most excited about. We've believed for a long time that the unique nature of our products and the demand that we've created. You know, we're doing better than $600 million a year in seats and sides. Those should be manufactured, more automatedly closer to consumer, shipped over shorter distances, both for efficiency, and for you know, to drive sustainability, which we're passionate about. We're making that real this summer. And, it's been a long project, a difficult project. It's required heavy engineering, reengineering of a product from a materials standpoint. So the long term benefits are myriad. Yes.

When we say neutral, we're targeting Sactionals cost. We're targeting we're trying to beat at least meat, but even beat Sactionals cost on an apples to apples basis pre tariff. Is our goal. Now we won't promise that at this moment, but that is our internal mandate. And, think we're gonna get there. So the long term benefit is more stable pricing better product, again, more efficient supply chain, shipping over shorter distances, more reliable, not subject to everything from pirates to hurricanes, to, you know, shipping container space, what have you. Particularly in the over this past decade. Since the tariffs began to throw everything up in the air in 2018.

Know, which is the better part of his decade now. It's been an extremely volatile international landscape. And rather than wait to be kicked out of the nest again, you know, we're completely out of China. At this point pretty much, and, we took that note pretty early compared to some. Rather than play this hopscotch game around the around the globe, this is the path that we've taken, and, thankfully, it's working out. Like, we have line of sight to this being successful. Finally, you know, so from a gross margin standpoint, this will have ideally a positive impact on our p and l. But then there's the warehousing and inventory carry as well. You can only imagine.

You know, we know right at this moment, there are probably 400 containers of sactionals or what have you, six and maybe five. So it's it's it's a ridiculous amount of product between you know, work in progress on the water and then, of course, in our warehouse. That can be mitigated tremendously. By manufacturing onshore, again, using these new materials. Then finally, satchels themselves are gonna improve. Like, this is not hyperbole. Will be a better product made in a more robust way that will have some new features that they will be completely groundbreaking. In the world of self sectionals. One of one.

And they are fundamental improvements that no one in this industry has ever solved or even conceived of solving. And our platform is gonna make that possible. And I can't reveal what that is yet, but we think it's a big deal. We think it'll make us way more competitive. Let alone have these positive impacts on our p and l, our operations, and the earth. So we're just super proud of the whole team that made this happen. And we're we're we're and intellectual property. You know, we've got some new patent work coming off of it as well. So we're we're this is the most exciting thing happening at Lovesac in my opinion.

Operator: Our final question is a follow-up from Thomas Forte with Maxim Group. Please proceed.

Thomas Forte: Great. Thanks for taking my follow-up real quick. Can you talk about your gross margin strategy on entering new rooms? Meaning, the new product should be comparable to products to date from a gross margin standpoint. Or there may be a situation where you promote heavily initially or any other reason why the initial gross margin would be lower than ramp over time?

Mary Fox: Yeah. I think, Tom, thank you for the question. So, you know, our targets, everything that we've been working internally is that we do want to maintain the gross margins that we've been proud to achieve. As we enter into the new room. The team have been very hard at work We've been looking at a lot of product and reviewing and challenging both in terms of the customer attributes, but also the manufacturing efficiencies. Leaning in terms of also production in The US. Which also will obviously give us some benefits.

So you know, for us, we see this as being able to maintain at the gross margin levels that, we've seen and actually Shawn talked about the excitement as we think about reimagining the inserts there is gonna be so much benefit in the new room in terms of just having that domestic product, being manufactured, getting it to customers even quicker. And managing our inventory, let alone just the awesome product that we're getting to see with the teams. Shawn, I don't know. Anything else you want to add on The New Room?

Shawn Nelson: No. Look. Our goal is to continue to target these high fifties gross margins. You've seen us fluctuate. Over the past number of years, that you've been tracking us, you know, between all really always between fifty five and sixty. So that's the place we think this business should be at. It puts us definitely at the high end in our industry. Of course, we speaking really candidly, we don't believe that going much higher than that is prudent for this category. It leaves us further open to competition, copycats, who knows, leaving too much meat on that bone. Right?

So it's a delicate balance, but our point of view has not changed, and the new room doesn't change it for us. And look, we expect to compete at the higher end of things with very practical product. That can do all the things that you have grown to, expect that consumers have grown to expect from ac and perform the same way from a quality standpoint. You know, features and adaptability standpoint, everything designed for life represents. But great question. And of course, we're we're we're super excited to get there.

But we just have so much opportunity in this in this coming year to lean into the core and the strength that this brand already has and really harvest some of that value. Look. We're the most prolific advertiser of couches on the planet. Delivering the best, most versatile couches on the planet. That's what we're known for. And so this is a really, we think, safe approach to the coming year in this choppy environment while you know, giving us opportunities to drive revenue, drive growth, and protect that gross margin. And so that's the that's the foundation we wanna be on when we launch that new room. That's what all of this is about. Excellent.

Thomas Forte: Thanks, Shawn. Thanks, Mary. Thanks, Keith. This will end our question and answer session. I would like to turn the floor back over to Shawn for closing remarks.

Shawn Nelson: Yes. Thank you so much to all of those shareholders, stakeholders who supported Lovesac and of course to our tireless Lovesac team. Who continues to fight to this crazy macro environment to deliver great results We're looking forward to the coming year.

Operator: Thank you. This will conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.